After a New Record High, Will the S&P 500 Soar in the Second Half? Here's What History Says.
The S&P 500 (SNPINDEX: ^GSPC) hit rough waters earlier this year amid concern that President Trump's tariff plan would hurt the economy, but the index since recovered and even closed the quarter and first half of the year at a record level. Will the index continue to soar from here in the second half?
History suggest the answer is yes. Let's check out the details.
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Image source: Getty images.
The stock market's first-half turmoil
So, first, let's quickly recap what happened over the past few months. The S&P 500, the Nasdaq Composite, and the Dow Jones Industrial Average all declined as investors worried about the effects of the president's import tariffs on the consumer's wallet and companies' budgets -- and that created a potential problem for corporate earnings. The idea was that players across industries could lose as prices rise and their customers spend less.
As a result, investors avoided stocks, but particularly growth ones, as growth stocks generally rely the most on a bright economic situation in order to expand. That means any threat to the economy could weigh on appetite for these sorts of stocks. And this is exactly what happened to artificial intelligence (AI) stocks, the players that led market gains last year.
In recent weeks, though, investor sentiment has improved as the U.S. embarked on trade talks with various countries and even signed deals with the U.K. and China. It became clear that tariff levels wouldn't be as high as originally expected, representing less of a headwind for growth.
On top of that, growth players from Nvidia to Alphabet delivered strong earnings reports, and messages from companies showed they continue to invest and spend. Meta Platforms even increased its capital spending forecast and just recently went on a hiring spree to boost its AI program. All of this has been good news for the stock market, and as a result, all three major indexes finished the first half of the year in positive territory.
The S&P 500's path from here
Now let's look to history for clues about the S&P 500's path from here. The benchmark made the following moves over the past several years:
| Year | S&P 500 First-Half Performance | S&P 500 Full-Year Performance |
|---|---|---|
| 2018 | 1.6% | (6.2%) |
| 2019 | 17% | 28% |
| 2020 | (4%) | 16% |
| 2021 | 14% | 26% |
| 2022 | (20%) | (19%) |
| 2023 | 15% | 24% |
| 2024 | 14% | 23% |
Data sources: YCharts, Macrotrends.
What's most compelling here is the trend in the late part of the first half generally predicted the full-year outcome. For example, the index finished the first half of 2018 in the positive, but it was on the decline from an earlier high -- and it went on to decrease for the full year.
^SPX data by YCharts
Conversely, in 2020, though the index fell in the first half, it finished that period on the rise, and the index rose for the full year.
^SPX data by YCharts
What history shows us
So over the past seven years, history shows us that the tone at the end of the first half sets the stage for what happens next. If the index has climbed or is on the rebound from a lower point, it's generally finished the year with a gain. This suggests that the S&P 500, even after reaching a record high, could be on track for a win in the second half of 2025 and even could climb by double digits.
^SPX data by YCharts
Of course, it's important to remember that the stock market doesn't always follow historical trends and could make a move that will surprise us. But, by considering what's happened in the past, we can get a general sense of what might be ahead. And if history is right this time around, there's reason to be optimistic about the second half of this year, especially since, as mentioned above, investor sentiment has improved. The element weighing on investors -- the trade situation -- has progressed in a positive direction, and if more satisfactory deals are signed, this could fuel stock market gains.
That's fantastic, but here's the best news of all: Regardless of the S&P 500's direction this year, the index always has gained over the long term -- and that greatly increases your chance of scoring a big investing win if you buy and hold.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Meta Platforms, and Nvidia. The Motley Fool has a disclosure policy.
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